The last shoe just dropped.
The S&P SmallCap 600 is now making new all-time highs.
Up until now, it had been the only major U.S. equity benchmark sitting out the party.
The Dow Jones Industrial Average, S&P 500, S&P MidCap 400, Russell 2000, and even the Russell Microcap Index had already broken out to fresh all-time highs.
But the S&P 600, the small-cap index that requires companies to actually generate positive earnings before they’re allowed in, had been lagging.
Think about that.
The index filled with companies that don’t need “good fundamentals” was already at new highs. The one that demands profitability was not.
Until now.
And when you dig beneath the surface of the small-cap universe, something even more important is happening.
Leadership is shifting. Sector dynamics are changing. Small-cap technology is behaving nothing like large-cap technology.
Energy and materials are quietly taking control.
This is not just a breakout.
It’s evidence of a new regime in small caps.
Let’s get into it.
Not All Small-Caps Are Created Equal
No one studies small-cap stocks with the depth and detail that we do at TrendLabs. Period.
This is our arena. We don’t dabble here. We compete here every single day.
So when the S&P 600 closes at new all-time highs, we pay attention.
Remember, this is the small-cap index that requires companies to generate positive earnings before they can be included. There’s a profitability screen. There’s a quality filter.
Meanwhile, the Russell 2000, which has more than three times as many components and no such earnings requirement, has been at new highs since last year.
Now the higher-quality cohort is confirming:
Also, think about this.
While the large-cap State Street Technology Select Sector SPDR ETF (XLK) has gone nowhere since October, the Invesco S&P SmallCap Information Technology ETF (PSCT) continues to press to new all-time highs.
That includes another fresh high just yesterday:
Small-cap tech and large-cap tech are not the same trade.
The market keeps proving that every week.
You should treat them differently, too.
A New Regime In Small-Caps
If the breakout in the S&P 600 is confirmation, the sector data is the tell.
Small-cap energy is already up more than 25% in 2026. And we’re not even half way through the first quarter.
This is not random noise. This is leadership:
Energy and materials sit at the top of the leaderboard right now. Small-cap industrials are up 16%. Small-cap technology is up more than 11%.
Meanwhile, large-cap tech is down on the year.
That divergence is the story.
At the index level, the small-cap Russell 2000 is up 7.6% year to date. The S&P SmallCap 600 is up nearly 10%. The S&P 500 is up just 1%.
The torque is in small-caps. The leadership is in different sectors. The regime is changing.
Natural Resources Are Taking the Baton
There’s a clear theme emerging in 2026.
Small-cap materials are breaking out to new all-time highs. This not what most investors were positioned for coming into the year:
And, quietly, energy is staging a historic move, especially in the small-cap space.
Look at the Invesco S&P SmallCap Energy ETF (PSCE). It just hit new 52-week highs and continues to press higher since the calendar flipped:
This is what sector rotation looks like in a healthy bull market.
Leadership doesn’t disappear. It rotates.
Everyone gets a turn. Now it’s natural resources and other forgotten corners of the market stepping up, right when most people stopped paying attention.
This is not random.
This is expansion.
And if you are still anchored to last cycle’s winners, you’re already behind.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs